Case BriefsSupreme Court

Supreme Court: The division bench of Dr. DY Chandrachud and MR Shah, JJ has upheld the validity of Section 54(3) of the Central Goods and Services Tax Act, 2017 (CGST Act) which provides for refund of unutilised input tax credit (ITC) in certain cases.

Provisions in question

Section 54[1] of the CGST Act provides for a refund of tax. Under sub-Section (1) of Section 54, a person claiming a refund of “tax and interest, if any, paid on such tax or any other amount paid” has to make an application within two years of the relevant date.

Parliament envisaged a specific situation where the credit has accumulated due to an inverted duty structure, that is where the accumulation of ITC is because the rate of tax on inputs is higher than the rate of tax on output supplies. Taking legislative note of this situation, a provision for refund was provided for in Section 54(3) which embodies for refund of unutilised input tax credit (ITC) in cases involving:

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies”.

Further, the Central Goods and Service Tax Rules 2017 were formulated in pursuance of the rule making power conferred by Section 164 of the CGST Act. Rule 89(5) provides a formula for the refund of ITC, in “a case of refund on account of inverted duty structure”. The said formula uses the term “Net ITC”. In defining the expression “Net ITC”, Rule 89(5)[2] speaks of “input tax credit availed on inputs”.

Case Trajectory

The petitioners approached the Gujarat High Court and the Madras High Court and made the following submissions:

(i) Section 54(3) allows for a refund of ITC where the accumulation is due to an inverted duty structure;

(ii) ITC includes the credit of input tax charged on the supply of goods as well as services;

(iii) Section 54(3) does not restrict the entitlement of refund only to unutilised ITC which is accumulated due to the rate of tax on inputs being higher than the rate of tax on output supplies. It also allows for refund of unutilised ITC when the rate of tax on input services is higher than the rate of tax on output supplies;

(iv) While Section 54(3) allows for a refund of ITC originating in inputs as well as input services, Rule 89(5) is ultra vires in so far as it excludes tax on input services from the purview of the formula; and

(v) In the event that Section 54(3) is interpreted as a restriction against a claim for refund of accumulated ITC by confining it only to tax on inputs, it would be unconstitutional as it would lead to discrimination between inputs and input services.

Gujarat High Court’s judgment

By its judgment dated 24 July 2020, the Division Bench of the Gujarat High Court, held that:

“Explanation (a) to Rule 89(5) which denies the refund of “unutilised input tax” paid on “input services” as part of “input tax credit” accumulated on account of inverted duty structure is ultra vires the provision of Section 54(3) of the CGST Act, 2017.”

The High Court therefore directed the Union Government to allow the claim for refund made by the petitioners before it, considering unutilised ITC on input services as part of “Net ITC” for the purpose of calculating refund in terms of Rule 89(5), in furtherance of Section 54(3).

Madras High Court’s judgment

The Division Bench of the Madras High Court came to a contrary conclusion, after having noticed the view of the Gujarat High Court, and held;

 “63…

(1) Section 54(3)(ii) does not infringe Article 14.

(2) Refund is a statutory right and the extension of the benefit of refund only to the unutilised credit that accumulates on account of the rate of tax on input goods being higher than the rate of tax on output supplies by excluding unutilised input tax credit that accumulated on account of input services is a valid classification and a valid exercise of legislative power.”

The divergent views by both the High Courts led to the case before the Supreme Court.

Supreme Court’s verdict

Upholding the constitutional validity of Section 54(3), the Court held that

“A claim to refund is governed by statute. There is no constitutional entitlement to seek a refund.”

The Court explained that Parliament while enacting the provisions of Section 54(3), legislated within the fold of the GST regime to prescribe a refund. While doing so, it has confined the grant of refund in terms of the first proviso to Section 54(3) to the two categories which are governed by clauses (i) and (ii) i.e.

(i) zero rated supplies made without payment of tax; and

(ii) credit accumulation “on account of rate of tax on inputs being higher than rate of tax on output supplies.

Parliament has in clause (i) of the first proviso allowed a refund of the unutilized ITC in the case of zero-rated supplies made without payment of tax. Under clause (ii) of the first proviso, Parliament has envisaged a refund of unutilized ITC, where the credit has accumulated on account of the rate of tax on inputs being higher than the rate of tax on output supplies.

“When there is neither a constitutional guarantee nor a statutory entitlement to refund, the submission that goods and services must necessarily be treated at par on a matter of a refund of unutilized ITC cannot be accepted. Such an interpretation, if carried to its logical conclusion would involve unforeseen consequences, circumscribing the legislative discretion of Parliament to fashion the rate of tax, concessions and exemptions. If the judiciary were to do so, it would run the risk of encroaching upon legislative choices, and on policy decisions which are the prerogative of the executive.”

Stating that courts are averse to entering the area of policy matters on fiscal issues, the Court said,

“Many of the considerations which underlie these choices are based on complex balances drawn between political, economic and social needs and aspirations and are a result of careful analysis of the data and information regarding the levy of taxes and their collection.”

The Court also found it impossible to accept the premise that the guiding principles which impart a measure of flexibility to the legislature in designing appropriate classifications for the purpose of a fiscal regime should be confined only to the revenue harvesting measures of a statute.

“The precedents of this Court provide abundant justification for the fundamental principle that a discriminatory provision under tax legislation is not per se invalid. A cause of invalidity arises where equals are treated as unequally and unequals are treated as equals.”

Noticing that both under the Constitution and the CGST Act, goods and services and input goods and input services are not treated as one and the same and they are distinct species, the Court said,

“Parliament engrafted a provision for refund Section 54(3). In enacting such a provision, Parliament is entitled to make policy choices and adopt appropriate classifications, given the latitude which our constitutional jurisprudence allows it in matters involving tax legislation and to provide for exemptions, concessions and benefits on terms, as it considers appropriate.”

[Union of India v. VKC Footsteps, 2021 SCC OnLine SC 706, decided on 13.09.2021]


*Judgment by: Justice Dr. DY Chandrachud

Know Thy Judge| Justice Dr. DY Chandrachud

For UOI: N Venkataraman and Balbir Singh, ASG

For Assessee: Senior Advocates V Sridharan and Arvind Datar; Advocates Sujit Ghosh and Uchit Sheth

For Respondents: Advocate Arvind Poddar


[1] “Section 54. Refund of tax

(1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

Provided that a registered person, claiming refund of any balance in the electronic cash ledger in accordance with the provisions of sub-section (6) of Section 49, may claim such refund in the return furnished under section 39 in such manner as may be prescribed.

[…] (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilized input tax credit shall be allowed in cases other than-

(i) zero rated supplies made without payment of tax;

(ii) where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods and services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilized input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.”

*********************************************

[2] “(4) […]

(B) “Net ITC” means input tax credit availed on inputs and input services during the relevant period;

[…]

(E) “Adjusted Total turnover” means the turnover in a State or a Union territory, as defined under sub-section (112) of section 2, excluding the value of exempt supplies other than zero-rated supplies, during the relevant period;

(5) In the case of refund on account of inverted duty structure, refund of input tax credit shall be granted as per the following formula: – Maximum Refund Amount= {(Turnover of inverted rated supply of goods) x Net ITC ÷ Adjusted Total Turnover} − tax payable on such inverted rated supply of goods

Explanation:- For the purposes of this sub rule, the expressions “Net ITC” and “Adjusted Total turnover” shall have the same meanings as assigned to them in sub-rule (4).”

Case BriefsSupreme Court

Supreme Court: The Division Bench of Sanjay Kishan Kaul* and Hrishikesh Roy, JJ., addressed the instant appeal against the order of High Court whereby the High Court had quashed the disciplinary actions taken against the respondent and had directed for reinstatement with consequential benefits. The Bench stated,

“…the fairness of the departmental proceedings is obvious on the fact that all charges relating to bribery had been held in favour of the respondent and those charges have been rejected.”

Background

The respondent joined the Department of Posts as Postal Assistant in the year 1991 and earned his promotion to Assistant Superintendent of Posts in 2008, a Group-B Gazetted cadre post. A charge memo was issued to the respondent the Disciplinary Authority, Department of Posts under Rule-14 of the Central Civil Services (Classification, Control and Appeal) Rules, 1965 which enumerated 9 charges. Though, certain charges were related to procedural lapses in discharge of duties while another set of charges dealt with alleged illegal gratification received by way of bribes.

It had been contended by the respondent that since the charges included allegations of bribery and had a vigilance angle, the same could not have been issued without prior approval of the Central Vigilance Officer as mandated by a circular dated 18-01-2005 of the Department of Posts, Ministry of Communication and I.T. The Circular advised that all cases of officers below Group ‘A’ involving vigilance angle should be referred to the Directorate for consideration and advice by the CVO of the relevant department.

The decision of the High Court upholding the memo released by authority was challenged before the Supreme Court. However, since the departmental proceeding against the respondent culminated in an adverse report against him, another memo dated 24-03-2017 was issued. In terms of the 2017 Memo, none of the charges of bribery were made out against the respondent but all charges relating to procedural lapses on the part of the respondent were held to have been proved. The respondent was inflicted with a punishment of compulsory retirement from service with immediate effect. Therefore, the Bench had disposed of the matter with the liberty to the respondent to re-agitate the issue by challenging the order of punishment.

Issue before the Bench

Pursuant to the order of the Supreme Court, the order of punishment was challenged by the respondent before Central Administrative Tribunal on the ground of non-compliance with the Circular. The Tribunal took the view that, since the bribery charges were not proved, the case of the respondent could not be said to be prejudiced by not referring it to the CVO. However, regarding the punishment issue, the Tribunal found that the punishment of compulsory retirement was unduly harsh and shockingly disproportionate considering that none of the bribery charges had been found sustainable. To that extent, the order of the disciplinary authority was set aside with a direction to impose an appropriate minor penalty. In appeal, the High Court had set aside the order of the Tribunal and directed to reinstate the respondent into service with all consequential benefits.

Assessment by the Court

The Bench opined that if procedural safeguards are provided the same should be observed as they prevent any arbitrary exercise of power. In Moni Shankar v. Union of India (2008) 3 SCC 484, it had been stated that, “a departmental instruction cannot totally be ignored”. However, the Bench was of the view that the case of the respondent differed in issue as the plea of the respondent that the action of the appellants was retributive in character, as he had earlier endeavoured to highlight the manipulations in the result of Postal Service Group-B cadre examinations and the legal proceedings that followed there from; the Bench opined that,

“The fairness of the departmental proceedings was obvious on the fact that all charges relating to bribery had been held in favour of the respondent and those charges had been rejected.”

The reliance on the Circular really did not help the case of the respondent inter alia for the reason that it was found that the case did not has a vigilance angle, albeit after conclusion of inquiry. As far as the procedural lapses were concerned, it really showed that there was negligence on the part of the respondent in performing his duties. That being so, it was inappropriate for the High Court to have set aside the result of the proceedings against the respondent by giving him a clean chit on the issue on the ground that the Circular was not being followed. Lastly, while upholding the views taken by the Tribunal on the issue of disproportionality of punishment, the Bench reiterated that the punishment of compulsory retirement was completely disproportionate and harsh; keeping in mind the finding arrived at by the disciplinary authority. The Bench stated, perhaps the charges originally levelled might have persuaded the authority concerned to impose punishment; losing site of the fact that the allegations qua bribery had not been found against the respondent.

Hence, observing that the nature of charges found against the respondent could hardly be one to call for a major penalty, keeping in mind that there was no bribery charge. The Bench stated,

“Anyone can make mistakes. The consequences of mistakes should not be unduly harsh”

The impugned judgment of the High Court was set aside and the order of the Tribunal was restored.

[Union of India v. P. Balasubrahmanayam,  2021 SCC OnLine SC 169, decided on 04-03-2021]


Kamini Sharma, Editorial Assistant has put this report together 

*Judgment by: Justice Sanjay Kishan Kaul

Know Thy Judge| Justice Sanjay Kishan Kaul

Appearance before the Court by:

For the Appellant: Addl. Solicitor General K.M. Nataraj,

Op EdsOP. ED.

The principle of least judicial interference was legislatively codified as Section 5 of the Arbitration and Conciliation Act, 1996[1] (Act) in order to ensure continuation of the arbitration without periodic interdicts by any court.  Section 16[2] of the said Act carves out an exception to the general rule by providing a right to the parties before arbitration to raise the plea of objection to the competency of an Arbitral Tribunal. This is based on the principle of kompetenz-kompetenz i.e., the power of the Tribunal to rule on its own jurisdiction[3].  The reason is that if an arbitrator is himself of the view that he is not competent, no purpose would be served by continuation of the arbitration proceedings. If the arbitrator finds lack of competency, the arbitral proceedings would come to an end. It is in view thereof that an appeal has been provided under Section 37[4] of the said Act. The position would be however different where the Arbitral Tribunal finds that it is competent to proceed with the arbitration. No appeal has been provided in such a case. The consequences of such a decision are provided in Section 16(5) of the said Act is that the arbitral proceedings would continue resulting in an arbitral award. The remedy is provided in Section 16(6) of the said Act which is to challenge the ultimate award under Section 34[5] of the said Act. There is no segregated challenge permissible only on the question of the competency of the Arbitral Tribunal.

            The question then would be, at what stage should the jurisdictional objections raised by a party to the arbitration be considered and decided by the Arbitral Tribunal?  This question also arises in view of the prevalent trend of Arbitral Tribunals deferring the consideration of jurisdictional objections to the stage of final award which often results in the party which has raised the objection at the threshold, having to contest the entire proceedings, thereby wasting considerable amount of time and that too at great expense.

            In the respectful view of the author, the bare reading of Section 16(2) along with Section 16(5) of the Act leaves no manner of doubt that the Tribunal has no discretion in deferring a decision on an application under Section 16 of the Act. Section 16(2) stipulates that a party raising jurisdictional objections shall have to do so not later than the submission of the statement of defence.  The very purpose of having a party raise objections at the threshold would get defeated in the event the decision on these objections is also not taken with equal promptitude. As per Section 16(5) of the Act, the Arbitral Tribunal “shall” decide on the jurisdictional objections, and where the Arbitral Tribunal takes a decision rejecting the plea, the Tribunal shall continue with the arbitral proceedings and make an arbitral award. The reading of Section 16(5) indicates that a decision rejecting the jurisdictional objections is a statutory precondition for continuance of arbitral proceedings. The statute envisages only one of two situations i.e. first, where Section 16 objections are accepted and Tribunal holds that it does not have jurisdiction and second, where the objections are rejected by the Tribunal. In the first case, the remedy of Section 37 appeal is available and in the latter, the award passed by the Tribunal can be assailed under Section 34 of the Act. Therefore, once a statutory remedy has been provided against an order passed on a challenge to the jurisdiction of the Tribunal under Section 16, then, such a challenge must, in the opinion of the author be determined at the threshold itself and there is no apparent reason for deferring a decision on the Section 16 application.

            Any refusal to go into the merits of the dispute is a jurisdictional issue.[6] Therefore, it would be manifest, that a decision on any objection regarding the competence of the Tribunal to go into the merits of the dispute must not, and indeed cannot be deferred and must be taken at the preliminary stage itself. This position is consistent with the decisions of the Supreme Court in McDermott[7], Kvaerner Cementation[8] and also in Ayyasamy[9], where it was held that “the jurisdictional challenge is required to be determined as a preliminary ground”.

            In several cases, while deferring the consideration of a challenge under Section 16, parties and Tribunals have placed reliance on the decision in Maharshi Dayanand University v. Anand Coop. L/C Society Ltd.[10] where it was held by a two-Judge Bench of the Supreme Court that there is no mandatory requirement to decide jurisdictional challenge as a preliminary matter, and that the same can be decided along with the final award. It is to be noted that the decision in Maharshi[11] did not consider the previous decision in McDermott[12], therefore, it could be argued that the decision in Maharshi[13] is “per-incuriam” and would not be good law. Similarly, in SAIL v. Indian Council of Arbitration[14] the Delhi High Court held that the wordings of Sections 16(2) and 16(5) do not place any mandatory condition of deciding preliminary objections to jurisdiction of the Tribunal at the threshold. Again, the High Court in arriving at its conclusion did not take into account the decision in McDermott[15] and Kvaerner Cementation[16], as such, the decision of the High Court cannot be said to be good law.

            Another aspect of the matter is the impact of the introduction of the Arbitration and Conciliation (Amendment) Act, 2015[17] (“2015 Amendment”) on the timeline and stage of consideration of the jurisdictional objections under Section 16 of the Act.  The 2015 Amendment was introduced with the objective of making arbitration user-friendly, cost effective and expeditious disposal.[18] In particular, Section 29-A was introduced mandating strict timelines of approximately one year for conclusion of arbitration proceedings.  With the introduction of the stricter timelines, there is a stronger case to be made for threshold examination of any jurisdictional objections at the preliminary stage itself. This would be consistent with the objective of expeditious disposal of arbitration proceedings and would also ensure that in cases of abuse of process, apparent jurisdictional bar, the party raising such objections is not made to wait till the conclusion of the proceedings for determination of these fundamental objections.  Such a course, if adopted, in the opinion of the author would pave way for furthering the cause of expeditious, and inexpensive arbitration proceedings.


Advocate, Delhi High Court and Supreme Court of India.

[1] <http://www.scconline.com/DocumentLink/87bn601l>.

[2] <http://www.scconline.com/DocumentLink/C8X6A4y5>.

[3] Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641; Duro Felguera SA v. Gangavaram Port Ltd., (2017) 9 SCC 729; Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455.

[4] <http://www.scconline.com/DocumentLink/0Vi7sQsH>.

[5] <http://www.scconline.com/DocumentLink/teuo89l3>.

[6] National Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft(2007) 4 SCC 451.

[7] McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

[8] Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, (2012) 5 SCC 214.

[9] A. Ayyasamy v. A. Paramasivam, (2016) 10 SCC 386.

[10] (2007) 5 SCC 295.

[11] (2007) 5 SCC 295.

[12] (2006) 11 SCC 181.

[13] (2007) 5 SCC 295.

[14] 2013 SCC OnLine Del 4490.

[15] (2012) 5 SCC 214.

[16] (2012) 5 SCC 214.

[17] <http://www.scconline.com/DocumentLink/9ajA4z9b>.

[18] Statement of Objects & Reasons – Arbitration and Conciliation Amendment Bill, 2015.

Case BriefsSupreme Court

Supreme Court: The bench of MM Shantanagoudar* and Vineet Saran, JJ has lucidly explained the law governing consent decree and has held that the well settled law that consent decrees are intended to create estoppels by judgment against the parties, thereby putting an end to further litigation between the parties, does not apply as a blanket rule in all cases.

In Gupta Steel Industries v. Jolly Steel Industries Pvt. Ltd.,  (1996) 11 SCC 678 and Suvaran Rajaram Bandekar v. Narayan R. Bandekar, (1996) 10 SCC 255, it has been held by the Supreme Court that it would be slow to unilaterally interfere in, modify, substitute or modulate the terms of a consent decree, unless it is done with the revised consent of all the parties thereto.  

However, in Byram Pestonji Gariwala v. Union Bank of India, (1992) 1 SCC 31, it has been held that a consent decree would not serve as an estoppel, where the compromise was vitiated by fraud, misrepresentation, or mistake. Further, this Court in the exercise of its inherent powers may also unilaterally rectify a consent decree suffering from clerical or arithmetical errors, so as to make it conform with the terms of the compromise.

Hence, keeping in line with the Court’s jurisprudence in the above mentioned cases, the Court said that it would be cautious in exercising it’s inherent power to interfere in this consent decree, except where there is any exceptional or glaring error apparent on the face of the record.

[Compack Enterprises India (P) Ltd. v. Beant Singh, 2021 SCC OnLine SC 97, decided on 17.02.2021]


Judgment by: Justice MM Shantanagoudar

Case BriefsSupreme Court

“A fair investigation is, but a necessary concomitant of Articles 14 and 21 of the Constitution of India and this Court has the bounden obligation to ensure adherence by the police.”

Supreme Court: The 3-judge bench of RF Nariman, Navin Sinha and Krishna Murari, JJ has IPS Officer Satyarth Anirudh Pankaj as the senior officer, State of Uttar Pradesh to carry out further investigation in the Ram Bihari Chaubey murder case after it found the investigation and closure report submitted by the UP Police to be “extremely casual and perfunctory in nature”.

Directing that IPS Officer Pankaj will be free to select a team of competent officers of his choice, the Court directed that

“the investigation must be concluded within a period of two months from the date of receipt of a copy of this order, unless extension is required, and the final report be placed before this Court. The Director General of Police (DGP), Uttar Pradesh shall do the needful.”

Background

Ram Bihari Chaubey, was shot dead at his residence in Village Shrikanthpur, Chaubepur, Varanasi in the State of Uttar Pradesh, on 04.12.2015. Four unknown assailants were stated to have come on a motorcycle. Two of them entered the residence and shot the deceased, while the two others waited outside, after which they all escaped.

From the material collected during investigation it was apparent that the murder was committed due to political rivalry by hatching a conspiracy effectively with the help of BJP MLA Sushil Singh (the respondent no.5[1]). An affidavit filed before the Allahabad High Court, disclosed that Sushil Singh 24 criminal cases against him including under Section 302 IPC.  In five cases final report had been filed in absence of credible evidence. In nine cases, he had been charge sheeted but was acquitted.  Five criminal trials are still pending against him and he had also been put behind bars under the provisions of National Security Act by order dated 11.11.1998.

An affidavit was filed by the DGP before the Supreme Court on 22.02.2020 stating that there was   no cogent evidence against Sushil Singh despite discreet efforts. Investigation of the case was therefore closed on 30.01.2019 and report submitted in the concerned court along with other police papers on 04.06.2019 with regard to the 4 accused persons only and no further investigation was pending against any person.

Analysis

The Court took note of the fact that the investigation which had been kept pending since 04.12.2015 was promptly closed on 30.01.2019 after this Court had issued notice on 07.09.2018.

Further, the Closure Report filed before the Court simply stated that there was no concrete evidence of conspiracy against Sushil Singh and that the informant had not placed any materials before the police direct or indirect with regard to the conspiracy. As and when materials will be found against Sushil Singh in future, action would be taken as per law.

Recording that the investigation and the closure report are extremely casual and perfunctory in nature, the Court noticed that the investigation and closure report do not contain any material with regard to the nature of investigation against the other accused including Sushil Singh for conspiracy to arrive at the conclusion for insufficiency of evidence against them.

“The closure report is based on the ipse dixit of the Investigating Officer. The supervision note of the Senior Superintendent of Police (Rural), in the circumstances leaves much to be desired. The investigation appears to be a sham, designed to conceal more than to investigate.” 

The Court also reminded the police of its primary duty to investigate on receiving report of the commission of a cognizable offence.

“This is a statutory duty under the Code of Criminal Procedure apart from being a constitutional obligation to ensure that peace is maintained in the society and the rule of law is upheld and applied. To say that further investigation was not possible as the informant had not supplied adequate materials to investigate, to our mind, is a preposterous statement, coming from the police.”

On scope of judicial interference in investigations, the Court said that investigation is the exclusive privilege and prerogative of the police which cannot be interfered with but if the police does not perform its statutory duty in accordance with law or is remiss in the performance of its duty, the court cannot abdicate its duties on the precocious plea that investigation is the exclusive prerogative of the police.

“Once the conscience of the court is satisfied, from the materials on record, that the police has not investigated properly or apparently is remiss in the investigation, the court has a bounden constitutional obligation to ensure that the investigation is conducted in accordance with law.  If the court gives any directions for that purpose within the contours of the law, it cannot amount to interference with investigation.”

The Court, hence, partially set aside the closure reports dated 02.09.2018, 17.12.2018 culminating in the report dated 30.01.2019 insofar as the non-charge sheeted accused are concerned only. Those already charge sheeted, were not interfered with.

Further, considering that the trial has commenced against the charge sheeted accused, the Court directed that further trial shall remain stayed.

[Amar Nath Chaubey v. Union of India, 2020 SCC OnLine SC 1019, order dated 14.12.2020]


[1] Ed Note: The order is silent on the name of Respondent No. 5. The name has been deduced from the Allahabad High Court verdict in Abhai Nath Chaubey v. State of U.P., 2019 SCC OnLine All 5782.

Case BriefsSupreme Court

Supreme Court: In the case relating to examinations conducted in 2017 by the Rajasthan Public Service Commission for filling up the posts of Senior Teachers where the Rajasthan High Court had re-evaluated the answers and had come to conclusion different from that of the Expert Committee, the 3-judge bench of L. Nageswara Rao*, Hemant Gupta and Ajay Rastogi, JJ held that the division bench of the High Court committed an error in recording findings on the correctness of 5 questions by holding the opinion of the experts to be wrong. The Court, however, did not set aside the judgment as it did not want to upset the appointments of 5 out of 21 appellants-therein who have already been appointed.

Background

  • Rajasthan Public Service Commission (RPSC) conducted written examinations on 01.05.2017 and 02.07.2017 in General Knowledge and Social Science respectively for selection of 9,551 Senior Teachers in Social Science, Sanskrit, Hindi, English and Mathematics.
  • RPSC issued the 1st Answer Key on 06.02.2018 and declared the results.
  • On 25.04.2018, a Single Judge of the High Court of Judicature for Rajasthan, Jaipur Bench referred 3 questions in the 1st Answer Key to be reconsidered by an Expert Committee. Shortly thereafter, a Single Judge of the High Court of Judicature for Rajasthan, Jodhpur Bench referred another 8 questions for reconsideration by an Expert Committee on 05.05.2018.
  • An Expert Committee constituted by the RPSC revised the Key Answers for 2 questions in Social Science and 1 question in General Knowledge. The 2nd Answer Key was issued pursuant thereto, and the Merit List was also revised on 17.09.2018.
  • The 2nd Answer Key was released by the RPSC on the basis of the recommendations made by the Expert Committee constituted pursuant to the directions issued by the High Court. Not being satisfied with the revised Select List which included only a few candidates, certain unsuccessful candidates filed Appeals before the Division Bench which were disposed of on 12.03.2019.
  • The High Court examined the correctness of the disputed questions by itself and came to a conclusion that the answers to 5 questions were wrong. After being informed that the results have been announced and the selection process was completed, the Division Bench of the High Court by its judgment dated 12.03.2019 directed revision of the Select List and give benefit of the revision only to the Appellants before the Court.
  • Supreme Court was called upon to decide whether the revised Select List ought to have been prepared on the basis of the 2nd Answer Key. The Appellants contended that the Wait List also should be prepared on the basis of the 3rd Answer Key and not on the basis of the 2nd Answer Key.

Analysis

The Court noticed that though re-evaluation can be directed if rules permit, the Supreme Court has, through various judgments, deprecated the practice of reevaluation and scrutiny of the questions by the courts which lack expertise in academic matters.

“It is not permissible for the High Court to examine the question papers and answer sheets itself, particularly when the Commission has assessed the inter se merit of the candidates.”

Hence, it was not open to the Division Bench to have examined the correctness of the questions and the answer key to come to a conclusion different from that of the Expert Committee in its judgment dated 12.03.2019.

Stating that courts should be very slow in interfering with expert opinion in academic matters, the Court said,

“In any event, assessment of the questions by the courts itself to arrive at correct answers is not permissible. The delay in finalization of appointments to public posts is mainly caused due to pendency of cases challenging selections pending in courts for a long period of time. The cascading effect of delay in appointments is the continuance of those appointed on temporary basis and their claims for regularization. The other consequence resulting from delayed appointments to public posts is the serious damage caused to administration due to lack of sufficient personnel.”

The Court, despite finding the approach of the High Court erroneous, did not set aside the judgment as it did not want to upset the appointments of 5 out of 21 appellants-therein who have already been appointed. It hence, upheld the Select List dated 21.05.2019 and the Wait List dated 22.05.2019 prepared on the basis of the 2nd Answer Key.

Taking note of the statement filed by the RPSC that there are vacancies existing which can be utilized for appointing the Appellants, the Court left it open to the RPSC and the State Government to fill up the existing vacancies from the Wait List in accordance with the merits of the candidates and directed the completion of the selection process within a period of 8 weeks from the date of decision.

[Vikesh Kumar Gupta v. State of Rajasthan, 2020 SCC OnLine SC 993, decided on 07.12.2020]


*Justice L. Nageswara Rao has penned this judgment 

For appellants: Advocates Akhilesh Kumar Pandey, Rakesh Karela and Ranbir Yadav

For State: Senior Advocate Dr. Manish Singhvi

Case BriefsSupreme Court

Supreme Court: The 3-judge bench of Ashok Bhushan, R. Subhash Reddy and MR Shah*, JJ had held that it is for the employer to determine and decide the relevancy and suitability of the qualifications for any post, not the Courts.

“Qualifications are prescribed keeping in view the need and interest of an Institution or an Industry or an establishment as the case may be. The Courts are not fit instruments to assess expediency or advisability or utility of such prescription of qualifications. However, at the same time, the employer cannot act arbitrarily or fancifully in prescribing qualifications for posts.”

In the present case, applications were invited by the appellant Bank for the post of Peon by publishing an advertisement in the local newspaper. The eligibility criteria mentioned in the said advertisement was that a candidate should have passed 12th class or its equivalent with basic reading/writing knowledge of English. It specifically provided that a candidate should not be a Graduate as on 01.01.2016

The respondent herein – original writ petitioner, based on the information provided by him in his application, was appointed. While scrutiny of the documents was going on, the appellant Bank came to know about a graduate certificate showing that the respondent was a graduate since 2014.  Thus, it was noticed and found that he was not eligible as per the advertisement and the Circulars and that the respondent deliberately, wilfully and intentionally suppressed the fact that he was a graduate. Therefore, his candidature was cancelled and he was not allowed to join the bank in subordinate cadre. The High Court of Orissa, however, directed the appellant Bank to allow the respondent to discharge his duties as a Peon as per the appointment order.

The Bank submitted that considering the nature of the post – Peon/subordinate cadre, a conscious decision was taken by it that a candidate having the qualification of graduation shall not be eligible and the candidate who passed in 12th standard or its equivalent with basic reading/writing knowledge of English shall only be eligible. Hence, unless it is found to be most arbitrary, the same cannot be the subject-matter of a judicial review.

The Court held that prescribing the eligibility criteria/educational qualification that a graduate candidate shall not be eligible and the candidate must have passed 12th standard is justified and it is a conscious decision taken by the Bank which is in force since 2008. Therefore, the High Court has clearly erred in directing the appellant Bank to allow the respondent-original writ petitioner to discharge his duties as a Peon, though he as such was not eligible as per the eligibility criteria/educational qualification mentioned in the advertisement.

Considering the facts and circumstances of the case at hand, the Court noticed that in the application, the respondent did not disclose that he is a graduate from 2014 and only mentioned his qualification as 12th pass. Therefore, the respondent deliberately, wilfully and intentionally suppressed the fact that he was a graduate. Had it been known to the bank that he was a graduate, he would not have at all been considered for selection as a Peon in the bank.

The Court further held that once having participated in the recruitment process as per the advertisement, thereafter it is not open for him to contend that acquisition of higher qualification cannot be a disqualification and that too when he never challenged the eligibility criteria/educational qualification mentioned in the advertisement.

[Chief Manager, Punjab National Bank v. Anit Kumar Das, 2020 SCC OnLine SC 897, decided on 03.11.2020]


*Justice MR Shah has penned this judgment 

Case BriefsSupreme Court

Supreme Court: The bench of Dr. DY Chandrachud and Indira Banerjee, JJ has held that the conclusion of the criminal trial does not conclude the disciplinary enquiry.

Background of the case


A police constable, who was tried and acquitted in a murder case, had challenged his dismissal from service after a disciplinary enquiry. The Division Bench of the Rajasthan High Court granted the respondent reinstatement in service with no back wages for the seventeen years that elapsed since his termination. The State had, hence, challenged the reinstatement before the Supreme Court.

  • On 13 August 2002, the respondent proceeded on leave and had to report back on duty on 16 August 2002. He failed to do so and eventually reported for work on 19 August 2020.
  • On 15 August 2002, one Daulat Singh lodged a written complaint in relation to the death of his brother Bhanwar Singh, caused by an accident with an unknown vehicle. However, it appeared during the course of the investigation that the death was homicidal. The respondent, along with 2 co-accused was arrested on 9 September 2002.
  • The respondent was tried for the offence of murder and was acquitted by the Sessions Court on 8 October 2003.
  • Departmental proceedings were also initiated against the respondent wherein the charges that were leveled against the respondent were:
    • Over-staying leave by a period of three days beyond the leave that was sanctioned;
    • Not seeking an extension of leave from the superior officer;
    • Involvement in the murder of Bhanwar Singh (the respondent was alleged to have run away from the scene of offence and tried to give it the colour of an accident);
    • Getting additional leave sanctioned by suppressing the correct reason on a misrepresentation to the superior officer; and
    • Conduct which has hurt the image of the police department.
  • In the finding of the Disciplinary enquiry it was noticed that the Court had not completely acquitted the said constable rather acquitted by giving him the benefit of doubt.

“From this it is clear that the Hon’ble Court has not acquitted charged constable in free form. Thus, I found said charge as completely proved due to which the image of police has blurred.”

What the Supreme Court said


On effect of acquittal in criminal trial on disciplinary proceedings

Though the acquittal brought finality to the question as to whether he had committed the offence of murder punishable under the Penal Code, however, the disciplinary enquiry stood on a broader footing. The disciplinary proceedings related not merely to the involvement of the respondent in the murder, but to the violation of service rules and the impact of his conduct on the image of the police force. Hence, the verdict of the criminal trial did not conclude the disciplinary enquiry.

Noticing that the disciplinary enquiry was not governed by proof beyond reasonable doubt or by the rules of evidence which governed the criminal trial, the Court said,

“True, even on the more relaxed standard which governs a disciplinary enquiry, evidence of the involvement of the respondent in a conspiracy involving the death of Bhanwar Singh would be difficult to prove. But there are circumstances emerging from the record of the disciplinary proceedings which bring legitimacy to the contention of the State that to reinstate such an employee back in service will erode the credibility of and public confidence in the image of the police force.”

On proof of misconduct in disciplinary proceedings

The standard of standard of proof in disciplinary proceedings is different from that in a criminal trial

In Suresh Pathrella v. Oriental Bank of Commerce, (2006) 10 SCC 572, a two judge Bench differentiated between the standard of proof in disciplinary proceedings and criminal trials in the following terms:

“ …the yardstick and standard of proof in a criminal case is different from the disciplinary proceeding. While the standard of proof in a criminal case is a proof beyond all reasonable doubt, the proof in a departmental proceeding is preponderance of probabilities.”

Further, the involvement of a member of the police service in a heinous crime, if established, has a direct bearing on the confidence of society in the police and in this case, on his ability to serve as a member of the force. Such an individual is engaged by the State as a part of the machinery designed to preserve law and order. The State can legitimately assert that it is entitled to proceed against an employee in the position of the respondent in the exercise of its disciplinary jurisdiction, for a breach of the standard of conduct which is expected of a member of the state police service.

“Confidence of the State in the conduct and behaviour of persons it has appointed to the police is integral to its duty to maintain law and order.”

On judicial review over disciplinary matters

In exercising judicial review in disciplinary matters, there are two ends of the spectrum. The first embodies a rule of restraint. The second defines when interference is permissible.

Rule of restraint:

“The determination of whether a misconduct has been committed lies primarily within the domain of the disciplinary authority. The judge does not assume the mantle of the disciplinary authority. Nor does the judge wear the hat of an employer.”

Deference to a finding of fact by the disciplinary authority is a recognition of the idea that it is the employer who is responsible for the efficient conduct of their service. Disciplinary enquiries have to abide by the rules of natural justice. But they are not governed by strict rules of evidence which apply to judicial proceedings. The standard of proof is hence not the strict standard which governs a criminal trial, of proof beyond reasonable doubt, but a civil standard governed by a preponderance of probabilities. Within the rule of preponderance, there are varying approaches based on context and subject. The first end of the spectrum is founded on deference and autonomy – deference to the position of the disciplinary authority as a fact finding authority and autonomy of the employer in maintaining discipline and efficiency of the service.

Interference when permissible

“The ultimate guide is the exercise of robust common sense without which the judges’ craft is in vain.”

At the other end of the spectrum is the principle that the court has the jurisdiction to interfere when the findings in the enquiry are based on no evidence or when they suffer from perversity. A failure to consider vital evidence is an incident of what the law regards as a perverse determination of fact. Proportionality is an entrenched feature of our jurisprudence. Service jurisprudence has recognized it for long years in allowing for the authority of the court to interfere when the finding or the penalty are disproportionate to the weight of the evidence or misconduct.

Judicial craft lies in maintaining a steady sail between the banks of these two shores which have been termed as the two ends of the spectrum. Judges do not rest with a mere recitation of the hands-off mantra when they exercise judicial review. To determine whether the finding in a disciplinary enquiry is based on some evidence an initial or threshold level of scrutiny is undertaken. That is to satisfy the conscience of the court that there is some evidence to support the charge of misconduct and to guard against perversity. But this does not allow the court to re-appreciate evidentiary findings in a disciplinary enquiry or to substitute a view which appears to the judge to be more appropriate. To do so would offend the first principle i.e. the rule of restraint.

[State of Rajasthan v. Heem Singh, 2020 SCC OnLine SC 886, decided on 29.10.2020]

Case BriefsSupreme Court

Supreme Court: Stating that the essential qualifications for appointment to a post are for the employer to decide, the bench of Arun Mishra and Navin Sinha, JJ said,

“The court cannot lay down the conditions of eligibility, much less can it delve into the issue with regard to desirable qualifications being at par with the essential eligibility by an interpretive re­writing of the advertisement. Questions of equivalence will also fall outside the domain of judicial review.”

The Court further held that if the language of the advertisement and the rules are clear, the Court cannot sit in judgment over the same. If there is an ambiguity in the advertisement or it is contrary to any rules or law the matter has to go back to the appointing authority after appropriate orders, to proceed in accordance with law.

“In no case can the Court, in the garb of judicial review, sit in the chair of the appointing authority to decide what is best for the employer and interpret the conditions of the advertisement contrary to the plain language of the same.”

The Court was hearing the appeal filed against the order of the High Court holding that candidates possessing the requisite years of experience in research and development of drugs and testing of the same, are also eligible to be considered for appointment to the post of Assistant Commissioner (Drugs) and Drug Inspectors under separate advertisements dated 04.01.2012 and 31.03.2015.

It was submitted before the Court that the academic qualifications coupled with the requisite years of practical experience in the manufacturing and testing of drugs were essential qualifications for appointment. Research experience in a research and development laboratory was a desirable qualification which may have entitled such a person to a preference only. The latter experience could not be equated with and considered to be at par with the essential eligibility to be considered for appointment. It was argued that the High Court erred in misreading the advertisement to redefine the desirable qualification as an essential qualification by itself.

The Court said that the plain reading of the advertisement provides that a degree in Pharmacy or Pharmaceutical Chemistry or in medicine with specialization in Clinical Pharmacology or Microbiology from a University coupled with the requisite years of experience thereafter in manufacturing or testing of drugs were essential qualifications. Preference could be given to those possessing the additional desirable qualification of research experience in the synthesis and testing of drugs in a research laboratory.

The Court also said that

“an expert committee may have been constituted and which examined the documents before calling the candidates for interview cannot operate as an estoppel against the clear terms of the advertisement to render an ineligible candidate eligible for appointment.”

[Maharashtra Public Service Commission v. Sandeep Shriram Warade, 2019 SCC OnLine SC 652, decided on 03.05.2019]

Case BriefsSupreme Court

Supreme Court: The bench of Arun Mishra and Vineet Saran, JJ disposed of a plea challenging the appointment of M. Nageshwar Rao as the interim CBI Director and said no further interference is required as the relief has already been granted with the appointment of a full time CBI Director. It said:

“In case the due process has not been followed in the appointment, it is always open to any incumbent, if so advised, to question the appointment in accordance with law but not in the routine manner and undue haste as shown in the petition.”

It was argued by the petitioner that the appointment of M. Nageshwar Rao as interim CBI Director was not made on the recommendations of the High-Powered Selection Committee. The committee was completely bypassed and had no role in the appointment of M. Nageshwar Rao thereby rendering the appointment as illegal as it is in violation of the procedure for appointment of Director, CBI under Section 4A of the Delhi Special Police Establishment Act, 1946.

The Court, however, held that the decision of the committee under Section 4A that the Government was authorised to post a suitable officer as interim Director due to the vacancy caused by shifting of Mr. Alok Verma. Thus, the aforementioned submission was totally misconceived and petitioners have failed to verify the aforesaid facts and the petition has been filed in undue haste without verifying the   fact   whether   the   appointment   has   been   authorised   by   the Committee for appointment of Director constituted under section 4A of the DSPE Act.

After advocate Prashant Bhushan made some comments on Twitter regarding the appointment of former interim chief of CBI M Nageswara Rao, the Attorney General KK Venugopal and consecutively, the Union of India have filed a contempt petition in the Supreme Court. The Bench hence, issued notice to advocate Prashant Bhushan and the said contempt petition will be heard separately.

Three judges of the Court i.e. Chief Justice Ranjan Gogoi, Justices A K Sikri and N V Ramana, had recused themselves from hearing the matter.

Background of the matter:

  • NGO Common Cause had sought specific mechanisms to ensure transparency in the process of appointing the CBI director. The plea had alleged that the October 23 last year order of the government appointing Rao as interim CBI director was quashed by the top court on January 8 but the Centre “acted in a completely malafide, arbitrary and illegal manner” to appoint him again in “complete contravention” of the Delhi Special Police Establishment Act.
  • On January 10, Rao, additional director in CBI, was made interim chief till the appointment of a new director, after the removal of Verma.
  • On February 4, Rishi Kumar Shukla, a 1983-batch IPS officer, took charge of the probe agency as a full-fledged director.

[Common Cause v. Union of India, 2019 SCC OnLine SC 232, decided on 19.02.2019]

Case BriefsTribunals/Commissions/Regulatory Bodies

Armed Forces Tribunal, New Delhi: A Bench comprising of Virendra Singh (Chairperson) and Lt. Gen. Sanjiv Chachra (Member) dismissed the original application filed, and gave certain directions to the service chiefs and other personnel responsible for conducting DSSC and TSOC about the merits of communicating any adverse/weak remarks in the course reports to the students for their evaluation and self-assessment.

The applicant was a bright army officer, who had completed several courses within the army with flying colours, without any adverse remarks. Having been selected for the Training Staff Officers’ Course (TSOC-37), he also stated that he had never had any adverse remarks in any of his ACRs, and had always performed his duties with sincerity and devotion. The applicant was considered for the position of Colonel by the Selection board for promotions. On being non-empanelled for the same, he argued that the adverse remark in the TSOC course report was responsible for him not being empanelled for the position of colonel. He filed a non-statutory complaint which was rejected by the Chief of Army Staff. Subsequently, he brought a statutory complaint before the government, pleading for a reconsideration of his application for the position of colonel and the removal of the adverse remark from his TSOC -37 Course Report as it was arbitrary and discriminatory. Furthermore, he argued that the adverse remark had not been communicated to him by the staff conducting the course, and thus the principles of natural justice had been violated.

After the government rejected the contentions of the applicant, the present application was filed. On considering the criteria for selection of candidates, the CR of the applicant, the quantification and distribution of marks, the division bench stated that an officer was promoted after a selection board perused through his/her overall profile, honours, awards, disciplinary record etc. and on the basis of the officer’s comparative merit. It was stated that the applicant was not empanelled as he had a lower comparative merit with respect to the other officers in contention for the position, and not because of the adverse remark. This was substantiated by the tribunal by illustrating that even without the marks allotted for value judgment, the applicant was not going to be empanelled according to his score. The tribunal held that the selection board had conducted the selection on a fair, objective and performance-based standard, and the applicant was rightly not empanelled for the position of colonel.

The tribunal also stated that although communication of adverse remarks is important for a person to know his fallibilities and work on improving them, the applicant had been informed about the adverse remark during periodic interactions. Furthermore, the communication, of course, reports to student officers is not required and so is not undertaken by the responsible officers, and the tribunal found no reason to uphold the argument of the violation of the principles of natural justice by the applicant. The tribunal also distinguished the present case from the cases of Union of India v. Bahadur Singh, (2006) 1 SCC 368, State of U.P. v. Yamuna Shankar Misra, (1997) 4 SCC 7 and S.T. Ramesh v. State of Karnataka (2007) 9 SCC 436. The tribunal stated that the cases mentioned dealt with modalities of recording and communication of adverse entries, which was not a consideration in the present case.

Thus, the tribunal dismissed the original application and gave no order with respect to costs. It also mentioned that it might be desirable for the adverse remarks related to an officer’s performance to be communicated to him as it would provide an opportunity for self-evaluation and assessment, especially in courses such as DSCC and TSOC, which are career progressing courses. However, the tribunal also expressed that it was something for the service chiefs to consider and the same was solely on their discretion. [Pankaj Bisht v. Union of India, 2018 SCC OnLine AFT 8341, Order dated 16-10-2018]

Hot Off The PressNews

Supreme Court: Refusing to interfere with the appointment of KG Bopaiah as the pro-tem speaker, the 3-judge bench of Dr. AK Sikri, SA Bobde and Ashok Bhushan, JJ said:

“Law can’t direct the Governor to appoint a particular person as Pro-tem Speaker. Unless convention becomes legal norm, it can’t be enforced by Court.”

The Bench had assembled on a non-working day to hear the interim petition filed by Congress-JD(S) against the appointment of BJP MLA Bopaiah as the protem speaker after the Court had directed that the Floor Test be conducted before a protem speaker. The Court had, on 18.05.2018, had asked newly sworn-in Karnataka Chief Minister BS Yeddyurappa to take a floor test at 4PM today.

While the Court had refused to interfere with the appointment of the protem speaker, it directed the live broadcast of the floor test and said:

“Live broadcast of Floor Test would be the best way to ensure transparency of proceedings.”

Earlier, Congress-JDS had approached the Supreme Court at late hours of Wednesday to stall the swearing in ceremony of BJP candidate BS Yeddyurappa as the Karnataka Chief Minister after the Karnataka Governor Vajubhai Vala asked him to seek trust votes in the floor test within 15 days of his swearing in. Without passing any order staying the oath ceremony of the new Karanataka Chief Minsiter, the Court said:

“In case, he is given oath in the meantime, that shall be subject to further orders of this Court and final outcome of the writ petition.”

(With inputs from ANI)